State awards $90-million computer contract to builder of problem-plagued healthcare.gov

Jun. 29, 2014

The federal health care site was considered a debacle because of its many problems. The company that built it will work on a system to help develop Michigan's budget, among other things. / AFP/Getty images

Written by

Paul Egan

Gannett Michigan

LANSING — The state of Michigan has awarded computer contracts worth nearly $90 million to the same Canadian firm that built the federal government’s Affordable Care Act website and took much of the blame for its disastrous launch.

Officials in the administration of Gov. Rick Snyder chose CGI Technologies and Solutions Inc., whose parent company is headquartered in Montreal, over three U.S.-based firms, despite the fact CGI did not submit the lowest bid and all of the problems with the initial launch of the HealthCare.gov website.

Accenture, a management consulting and technology firm headquartered in New York, offered the lowest price by nearly $5 million, but “CGI provided best value,” Kurt Weiss, a spokesman for the Michigan Department of Technology, Management and Budget, said Friday.

State officials were “aware that there may be potential arguments that CGI is not a qualified vendor based on their recent involvement with health care at the federal level,” Weiss said.

“But the feeling of all involved was that those allegations are simply false,” Weiss said. “CGI is a leader in the field and they are recognized for excellence in … implementation, particularly in a government setting.”

House Minority Leader Tim Greimel, D-Auburn Hills, disagrees.

“It’s very unfortunate that the Snyder administration has chosen to use a foreign company, and especially a foreign company with a dismal track record of completely botching the federal government’s Obamacare website,” Greimel told the Free Press Friday.

“It’s especially troubling that (they) chose to go with a higher bid from Canada, rather than a lower bid from an American company,” he said.

The State Administrative Board on Tuesday awarded CGI two contracts worth $89.5 million to build the state’s Enterprise Resource Planning system. That’s the business management software and hardware that will replace Project MAIN (Michigan Administrative Information Network), launched in the mid-1990s at a cost of more than $120 million. The system is antiquated and not web-based.

The ERP system will cut checks to state vendors, manage grants and grant payments, keep track of employee hours and sick time, and aid in developing the state budget, among other functions.

One contract is for $50.6 million over seven years. The other is for $38.8 million over three years.

CGI, with 2013 revenue of $10.1 billion, has about 68,000 employees in 40 countries, according to its website.

The company “has an office in East Lansing and has workers based here in Michigan, so there was no issue as far as being a Canadian-based company,” Weiss said.

CGI’s price was the second-lowest of four bids considered, at $91.6 million, while Accenture bid $86.8 million, Weiss said. A joint evaluation committee with representatives from DTMB, Treasury, and the Transportation Department, selected CGI over Accenture because “their solution is a much better fit for the state’s needs,” and offered better prospects for long-term savings, Weiss said. After awarding the contract, the state negotiated nearly $2.2 million in concessions from CGI, bringing the final price to $89.5 million, he said.

Bids from Deloitte LLP and IBM also were considered, Weiss said.

The federal government and CGI parted ways in February over problems with HealthCare.gov, which was developed by CGI. When the Affordable Care Act launched in October, there were huge problems and lengthy delays for people wanting to sign up for health insurance on the federal marketplace site.

CGI spokeswoman Linda Odorisio said the company has successfully delivered hundreds of ERP programs that manage $700 billion and serve 93 million Americans. Though its work on HealthCare.gov has ceased, the company maintains a 15-year partnership with the federal agency that administers the site and “serves federal and state healthcare program beneficiaries nationwide.”

State Rep. Aric Nesbitt, R-Lawton, chairman of the House Committee on Energy and Technology, said he has concerns based on what he learned from the Free Press, but he would have to look into the issues further before drawing conclusions.

“The job they did on the health exchange website was less than spectacular — it was horrendous,” Nesbitt said.

The State Administrative Board, which approves most significant state contracts and leases, consists of the governor, the lieutenant governor, the secretary of state, the attorney general, the treasurer, the superintendent of public instruction and the director of the Department of Transportation. Generally, those officials send representatives to the board’s meetings, which typically last only a few minutes.

The Legislature was involved in appropriating money for the ERP project, but not involved in the awarding of the contract itself.

Greimel said the Legislature needs to “exercise more oversight of the administration on all kinds of things,” but “it’s not unusual for the current Legislature to give very broad discretion to the Snyder administration.”

“This is a perfect example of why we need to hold the Snyder administration accountable.”